Horne v Magna Design Building Ltd (TCC - 17.10.2014

The flatowner should not have summary judgment for the sum which the adjudicator indicated he would have been entitled to as the cost of completing the works if he had had the jurisdiction to determine his claim for that cost

Technology and Construction Court
Akenhead J


17th October 2014

The flatowner purported to terminate the contractor’s employment. The contractor served a notice of adjudication in which it described the dispute as one over outstanding payment for works completed and invoiced to the flatowner and stated that there were no grounds for the flatowner to terminate the contract and withhold payment. The JCT contract provided (i) by clause 6.7.1 that where the contractor's employment had been terminated, the employer could employ and pay other people to carry out and complete the works and (ii) by clauses 6.7.3 and 6.7.4 that an account was to be taken of the cost of completing the works so if that cost exceeded what would have been the cost if the contractor had completed the works, the balance was payable to the employer. The flatowner argued that it, rather than the contractor, was entitled to money on this basis. However, the adjudicator determined that he had no jurisdiction to decide whether there was a net sum due to the flatowner because his jurisdiction was limited to determining (i) The validity of the termination and (ii) The extent to which the contractor was entitled to any payment. The adjudicator decided that (i) The termination was effective and proper and (ii) The contractor was not entitled to any payment. The adjudicator stated that (i) The flatowner had prepared an account which purported to satisfy clause 6.7.3 but (ii) It would not be appropriate to make any finding as to any balance due to him pursuant to clause 6.7.4 notwithstanding that (a) The account produced a net balance due to him and (b) The flatowner’s claim represented a close approximation to his proper entitlement had the matter been referred to him for determination.
The flatowner issued proceedings in which he claimed the net balance referred to by the adjudicator. Akenhead J refused his application for summary judgment.
By the time of the notice of adjudication the flatowner’s defence to the claim was simply that he did not have to pay because he had validly terminated the contractor’s employment. The dispute referred to adjudication did not encompass whether the flatowner was entitled to a net sum although the adjudicator was entitled (i) to consider the later accounting documentation to determine whether there was or might otherwise be a sum due to the contractor and to determine that he had no jurisdiction to award a net sum to the flatowner.